MarkWest Energy Earnings in Line, Up Y/Y on Higher Volumes - Analyst Blog

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Natural gas processor and distributor MarkWest Energy Partners LP ( MWE ) reported second-quarter 2014 earnings - excluding mark-to-market derivative activity, compensation expense and asset sale adjustments - of 19 cents per unit, in-line with the Zacks Consensus Estimate. Meanwhile, the bottom line improved from the year-ago adjusted profit of 8 cents per unit. Significant improvement in natural gas processing volumes in the Marcellus and Southwest regions favored the results.

Revenues of $518.4 million failed to meet the Zacks Consensus Estimate of $532 million. The top line, however, was up approximately 25% from the second quarter of 2013.

Quarterly Cash Distribution


On Jul 24, 2014, MarkWest Energy raised its second-quarter 2014 cash distribution by 1.2% sequentially and 4.8% year over year to 88 cents per unit ($3.52 per unit annualized). Also, the distribution will be paid on Aug 14.

Distributable Cash Flow

During the reported quarter, MarkWest Energy generated distributable cash flow (DCF) - an indicator of cash paid out for distribution to unitholders - of $161.7 million, exhibiting a 26% rise from the prior-year quarter level of $128.4 million, providing 1.04x distribution coverage.

Business Units Performance

Southwest: With regard to business units, the Southwest segment's operating income increased 11.2% from the year-ago level to $83.2 million. The results reflect higher throughput and processing volumes in the East Texas and Western Oklahoma regions.  

Northeast: The segment's operating profit of $20.1 million was down 14.8% from last-year quarter's $23.6 million owing to lower fractionation volumes.

Marcellus: This segment (the partnership's Marcellus Shale joint venture) reported a profit of $110.3 million, up 36.5% from $80.8 million in the year-earlier quarter. A significant improvement in natural gas processing volume aided the upside.

Utica: Operating income from MarkWest Energy's newest segment, Utica, was $6.6 million against a loss of $1.7 million in second-quarter 2013. Higher throughput and processing volumes led to the improvement.

Operating Cost

The partnership reported operating expenses of roughly $462.7 million, reflecting a significant increase of 68.2% from $275.1 million reported in the year-earlier quarter.

Capital Expenditure & Balance Sheet

During the quarter under review, MarkWest Energy spent approximately $728.2 million capital, reflecting a decrease from $803.5 million a year ago. The partnership also declared that it had roughly $74 million of cash and cash equivalents in its wholly owned subsidiaries. Total outstanding debt stood at approximately $3.5 billion, representing a debt-to-capitalization ratio of about 39.1%.   

Zacks Rank & Other Stocks to Consider

MarkWest Energy currently has a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

Meanwhile, one can look at better-ranked players in the same industry like Atlas Pipeline Partners LP ( APL ), Delek Logistics Partners LP ( DKL ) and Kinder Morgan Management LLC ( KMR ). All the players carry a Zacks Rank #2 (Buy).


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.




This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: MWE , APL , KMR , DKL

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